Penny Stocks can be a very useful way to provide you with a secondary income. They can be used to create a good source of passive income because they do not require you to be constantly watching over them. The problem that most people have when it comes to stocks is – not knowing the right time to sell.
Penny Stocks can rise very fast but they can also fall quickly too. The reason that most investors hold onto a stock is because they fail to separate their emotions from their actions.
All of the buying and selling related to penny stocks should, of course, be based on sound research both of the market and the companies’ recent history. How the company is doing in terms of profitability, whether they are just about to, or have just announced profits, losses or new patents, discoveries and products, can all affect your decision on whether or not to buy.
Knowing the right time to sell your penny stocks however can sometimes seem as much an art as a science, although getting it wrong can be fatal. Many people seem to put all their research efforts into knowing what penny stocks to buy and when to buy them.
Investors seem to forget about researching to sell stocks. Instead, they let their emotions take control and sell at the wrong time. Investors selling at the wrong time fall into two categories. These categories are, The Runners and The Sitters.
The Runners like to take profit away too early. They see their Penny Stocks rise a little and sell because they don’t want to risk too much. I’ve seen it time and time again; these people set out to earn a 20% Return on Investment and end up taking profit at 2%. Someone who takes profit twice at 20% earns a lot more than someone who takes profit twice at 2%. Usually as soon as they sell a penny stock, it will rise even further and they’ll be wondering why they sold so early.
The Sitters are the heavily emotionally involved in their penny stocks. They are gamblers at heart and just do not want to let go of a losing position because it could bounce back any day now. When they do let go of their Penny Stocks there is virtually nothing left. The sitters like to sit on a losing position. They like buying but dislike selling.
The question that arises here is that do you want to be a Runner or a Sitter? Well, I hope you are neither. You want to be a winner. A winner will separate their emotions from their investment thinking and will also research when buying and also when selling. They will buy and they are not afraid of selling.
There is great deal of profit to be made from trading in Penny Stocks. But you have to know not only what to buy but also how long to keep it and when the best time to sell. The answer, as with most things in the world of finance, is good information and research. But that doesn’t end when you buy. Find out why your penny stocks are rising and this will put you in a much better position to know when to sell.